Global currencies traded steady on Monday ahead of upcoming central bank decisions in Japan and Europe and shifting expectations for a rate cut by the United States Federal Reserve. This indirectly forced the dollar's fall to a halt despite being driven by data this year.
The Japanese yen was one of the stronger movers, strengthening from 148.80 per US dollar on Friday, to as low as 147.74, as the Bank of Japan (BOJ) began its two-day policy meeting.
Expectations to exit negative rates at this meeting have eased after the New Year's Day earthquake off Japan's west coast, along with dovish BOJ comments.
The yen, which is sensitive to interest rate differentials between the United States and Japan, has been hit hard against the dollar this year, falling about 5% in an attempt to recapture a five-month peak of 140.
Traders found a factor influencing the yen's movement was the large expiration of currency options this week. LSEG data shows that while most options expire between Monday and Thursday with prices between 147.15 and 148.10 for the dollar-yen.
The euro was down 0.1% at $1.0888 and the pound strengthened slightly at $1.27095. This left the US dollar index trading at 103.24, remaining flat on the day.
The US dollar has received the most stimulus in currency markets, and the US dollar index has risen about 1.8% since the start of the year, although the US dollar's movement has been somewhat limited as investors try to decide when the Federal Reserve will start cutting rates.
Data at the end of last week showed that US economic activity remained strong despite interest rates at their highest levels in decades causing markets to lower expectations of a rate cut as early as March.
Interest rate futures show traders expect rate cuts to start in May. Long-term bond yields have risen steadily, with the 10-year yield up 30 basis points this month.
For European market players, this week's data will gain significant attention, with European, Canadian and Turkish policy meetings on Thursday, the season of earnings data releases and the conflict in the Red Sea threatening global trade and supply chains.
